CONTRIBUTION TO FINANCIAL SERVICE PROVIDERS BILL AND DIGITAL ASSETS BILL CHESTER COOPER, EXUMAS AND RAGGED ISLAND MP, PLP DEPUTY LEADER
It is my honor to rise today to offer a contribution to debate on the
Financial and Corporate Service Providers Bill 2020 and the Digital
Assets and Registered Exchanges Bill 2020.
I won’t be long as we support both these bills.
Before I proceed, on behalf of the people of Exuma & Ragged island, let
me make two points.
I want to re-iterate my disappointment in the recent announcement by
Scotiabank that they will close their branch in Exuma and other Family
Islands.
As a businessman, I understand their profit imperative, however, I have
told the bank that as an MP, I am not a happy man.
My constituents have loyally supported this institution since 1968, for
more than five decades.
We believe that it’s the government’s job to negotiate on behalf of the
people and we have no way of being satisfied that adequate efforts
were made on behalf of these islands.
With that said, we trust that this administration will not throw its hands
in the air, but will make efforts in earnest to ensure these islands have
adequate banking infrastructure. It is essential for orderly family island
development.
Secondly, I will note that is growing increasingly tiresome continuing to
call for more advanced notice of what is to be debated at the next
sitting of the House.
With these bills, we had less than 24 hours’ notice to prepare.
The Digital Assets Bill in particular takes some digesting even for the
financially savvy.
Despite these things being on the extensive list of notice, it is the
courteous and professional thing to do to advise members of what is
being debated with at least a week’s notice.
And I truly am unconcerned as to what happened in previous
administrations.
We can do better and we must.
It defeats the purpose of asking for proper representation by members
in these debates if members are not able to research and thoughtfully
consider their contributions.
But I do take my job seriously and I am familiar with these areas of our
economy, so let us proceed.
We do confirm that there has been consultation with industry and
these are being advanced by the Securities Commission of The
Bahamas.
We want to thank and commend the Securities Commission for its
thoroughness, diligence and competence in these matters.
I want to look at few key areas of the Financial and Corporate Service
Providers Bill just to note some of the things I find important.
I’m very glad that this legislation clearly outlaws financial schemes like
Ponzi and pyramid schemes that prey on Bahamians who may not be
well-versed in complex financial operations.
We need to protect people from bad actors who claim that money just
falls from the sky.
Some have lost their life savings and we need to protect them and
prevent this from happening again.
I would like, however, for government to clarify whether this covers
asues.
While I don’t personally like the high-risk profile of asues, making them
illegal might see many Bahamians in violation of the law.
As the violation carries a fine of up to $75,000 on a first violation and
double the fine and possibly four years in prison on the second
violation, we need to be careful.
Asues are as much a part of Bahamian culture as conch salad.
It would be good if we could get some clarity from government on this
and what it all means for asues.
On the harmful schemes that are out there, you can expect a further
increase during these times due to financial desperation.
What I want to say to Bahamians is to beware of people selling dreams.
Please be vigilant with your funds especially in this challenging
desperate economic environment.
I want to urge them that if they are in doubt, seek out the advice of a
credible financial professional or the regulator before you hand any
money over.
While we want to protect vulnerable people, we also want to make
sure that people are better versed financially with saving and investing.
I have noted repeatedly in here that our national savings rate is
abysmal. Yes, we understand the current environment of high
unemployment and high cost of living. However, this is an historic
challenge even in pre-pandemic economic times.
As the economy crawls back toward some sense of normalcy, hopefully,
once the major resorts reopen, we should encourage Bahamians to put
something away for a rainy day.
I call on the government to lead a National Savings Campaign with the
support of banks, insurance companies and financial services
institutions.
Not only is this critical for families in emergencies, but it also fosters
national development, financial discipline and increases the possibilities
for wealth creation by being able to take advantage of investments and
other opportunities.
But, as I often point out, if you won’t do it, the PLP will do it after the
next election, as well as integrate financial literacy in the school
curriculum, beginning at the primary level.
There is also a concern about the low level of participation in pension
plans in the country.
We need pension reform in the public and private sector.
And there also needs to be easier access for companies to get their
employees participating in pension funds.
Too many Bahamians work for a lifetime and find themselves struggling
in retirement or unable to retire.
The National Development Plan speaks to this and it is something we
plan to action.
We also call on the government to harmonize regulators of financial
and corporate service providers.
As it stands there is too much overlap that leads to inefficiencies such
as sometimes needing multiple licenses and submitting to multiple
oversight procedures that duplicate efforts.
And let me just say: I know of what I speak in this regard.
In full disclosure and I don’t know that it’s a secret, a company I have
holdings is involved in the mobile wallet and electronic bill payment
sector.
As an example, under the Financial and Corporate Service Providers Bill
we are debating today, it provides oversight of mobile wallets and bill
payment services.
However, the Central Bank of The Bahamas also seems to provide
oversight of mobile wallets under its Non-Bank Electronic Retail
Payment license.
And then there is the issue of the Financial and Corporate Service
Providers license itself.
It is unclear from reading this legislation whether a company only
providing corporate services like company incorporations would require
the full Financial and Corporate Service Providers license.
Perhaps it would be possible to provide such separations under
different classes of the license.
I suppose this point can easily be clarified in the guidance notes and the
regulations.
However, this clarification is key as it will determine the level of
oversight by the Securities Commission.
I think this is more in line with the modern approach of risk-based
regulations.
Digital Assets and Registered Exchanges Bill
With regard to the Digital Assets and Registered Exchanges Bill, it has
my support, but I want to point out a few things.
So, this bill is clearly about regulating who can provide platforms for
digital currency, cryptocurrency trading, custodianship, and interchange
with digital and other government-backed currency.
I think this is a really good step.
It creates the framework for a progressive ecosystem.
However, I do want to note, that mobile wallet providers are well
ahead in this arena and should be continuously engaged.
The Central Bank alone cannot build all the capacity needed with the
ongoing engagement of the stakeholders.
When I look at the suspension, revocation, and cancellation clause, it
seems a bit broad.
We don’t want to have prosecution in this area be improperly
motivated.
When you start listing reasons for suspension or revocation in such
vague terms; we must be careful to strike the right so as not to over-
reach and over-regulate, that is when we start getting into dicey
territory.
So, though it has shown itself to be responsible, the Securities
Commission will be able to simply decide that a partner, manager, or
officer should be removed and the only recourse is to win in court. This
of course is not new territory, but must be carefully navigated.
Our courts are littered with cases that have been overturned on appeal.
The prevailing judicial view is that destroying a business should only be
done on very narrow grounds and only in necessary cases.
So, we probably need to be a little more detailed with the
circumstances where this section can be invoked.
Again, mobile wallet providers are already subject to two active
regulators in the Central Bank and the Securities Commission.
They will need also now need a license from the Central Bank and
another one under the Financial and Corporate Service Providers.
It is, in my view, unnecessarily duplicative.
I also wonder how many different virtual currency tokens we will
expect to operate in the country and do we consider whether they will
be interoperable with Sand Dollar?
There is also the question as to whether there is an expectation that
Bahamas-based digital tokens will be offered internationally or used
internationally?
What will we term and structure this industry as?
What is the strategy to support this nascent industry?
How will we democratize Bahamian participation in ownership,
management, and operation of as many aspects as practical of the
infrastructure that supports the entities and offerings in
this embryonic industry?
How do we commit to using this as a lever to reestablish Bahamian
competitiveness and within 7-10 years regional and international
supremacy in insurance, trusts, fund administration, fund management,
and trade facilitation?
Have we thought this through as an ecosystem? How can we build it,
combined with FinTech, RegTech and SupTech?
How can we build this from the ground up, forecasting the opportunity
for our economy in light of the changes in the world?
How can we reimagine quickly the creation of competitive advantage in
this space, like Estonia would have created by first building a digital
platform, and then potentially pivot into blockchain?
How do we address digital theft, cyber security and other related
financial crimes that could impact our market confidence and
reputation as a country?
What type of environment do we want to create? What type of skills do
we want to create? What type of talent do we want to attract?
Are there Bahamians with expertise living abroad, or here, who can
come back to drive our efforts in this space?
You see what I’m getting at?
Where’s the plan?
I ask that a lot with this administration.
Cayman Islands passed the Virtual Assets (Service Provider) Law 2020
that is eerily similar.
We must not just pass laws without a strategy to grow the industry.
Without a strategy, a vision, an enabling framework, the laws are dead
on the vine.
Do we have projections for what this industry will look like, what it will
contribute in terms of our GDP?
Block chain technology has the opportunity to change the world.
I think the sand dollar is innovative and progressive and is a good start
but we must leap forward to develop the block chain industry.
Whilst the Sand Dollar is innovative, we must not rest on our laurels
I say again, we must look to see how we can build an industry around
crypto and digital currency as a pivot for financial services
It is noteworthy that Iran has accepted bitcoin as legal tender.
Whilst this was motivated through necessity because Iran is prohibited
from using US dollars for imports, we too must look outside the box in
our thinking. Perhaps our neighbor Cuba will be next?
We must accept this move by Iran as a trend for the future and be
innovative, futuristic, proactive and strategic in our thinking.
If we look at what is happening in the world, Malta has positioned
themselves as the block chain capital of Europe.
Singapore and Switzerland have passed proactive legislation
Puerto Rico, as far as the USA, is concerned is taking the lead.
The Marshall Islands has established their legal tender currency, “the
sovereign”, as a cryptocurrency giving it sovereign credibility.
It has been predicted that blockchain can have a significant shift on
how business is transacted worldwide.
We have opportunities for job creation, to attract capital for start-ups
and financial capital for other reasons through a block chain exchange.
We have the opportunity to create a capital aggregator that makes for
businesses as custodians as many of the traditional banks aren’t
providing custodian activities.
There is an opportunity for The Bahamas to seize a big opportunity
here.
Despite the volatility in the crypto-currency market, there is no doubt
that it is here to stay and central governments are moving toward
embracing it.
We can do the same and benefit greatly.
But we will need a plan and a smart strategic plan.
We can lead and shine in this space by causing huge advances and
leveraging our proximity to the USA.
Win the hearts and minds of the crypto world by creating a crypto-
friendly environment leveraging our strengths as an international
financial services center.
Give more than just lip service to ease of doing business, but make
tangible advance quickly, making it not just to easier to do business but
to make it easy to live in our beloved country.
In putting in place regulations we must ensure that we think them
through.
The block chain business is based on a libertarian philosophy and the
industry thrives in such environments.
It can be an opportunity to pivot our traditional financial services
industry and lift the tide.
Our model has been to attract capital, we must advance to attracting
intellectual capital.
Our long-term plan must consider pivoting the home office model with
sensible policies as a part of our long-term plan to attract skills and
create high end jobs.
So, we support these bills.
We will vote for them.
We are doubtful that this administration will move the needle in this
space.
However, we commit to the Bahamian people that a PLP administration
will dedicate the resources and engage appropriate expertise to seize
our place in the crypto world, to empower Bahamians.
With that, I rest.
May God continue to bless Exuma, the Exuma Cays and Ragged Island.And my God bless the Commonwealth of The Bahamas.
